The Parallel Parliament

by Glen Pearson

Tag: debt

Poverty’s Great Unknown – Facets of Us

poverty_653785

IN SPEAKING FREQUENTLY EACH WEEK, it’s becoming clear that more and more groups are broaching the subject of poverty and what might be done about it. They have become aware that the London Food Bank is attempting to develop a new model in which people can be treated with greater dignity, offered more personal choice, and achieve success at avoiding the problems of “poverty stigmatism.” In an interview yesterday I was asked why the food bank doesn’t just close its doors and get on with the delivering a new way of doing things.

The answer to that question is actually fairly simple: communities are complex organisms and if any change is to prove successful, then citizens, organizations, and food bank users themselves must be brought into the development phase of a new model. Whatever answers emerge from such an exercise will carry the authority of a community sense of ownership as opposed to one group merely deciding on its own.

But there is a second problem, and it effectively impacts the above exercise in confounding and complex ways. I speak of the very stubbornness of poverty itself in this country. Part of our trouble in finding solutions concerns our collective ignorance of the poverty dilemma. Just as a taste of what we are referring to, the next two posts will consider some things most people don’t know about poverty and its presence in our communities.

1) Child poverty in Canada remains far too high, even after two decades of attempts to lower it. According to UNICEF’s recent survey, this country is below average among wealthy nations when it comes to dealing effectively with children in difficult economic situations. The survey highlighted the fact that in Canada 13.3% represents the number of those children in poverty, as opposed to 11% in 35 other advanced economies. Worse still, a full one-half of First Nations children remain mired in poverty. For any food bank this is a significant problem. Slightly under 40% of clients serviced by the London Food Bank are children 17 and under, and their needs won’t be going away until we take their plight seriously.  And that means assisting their parents.

2) The burdens of poverty are different depending on which group we are talking about. Economic stringency doesn’t hit everyone universally the same. People with disabilities face unique challenges compared to, say, someone unemployed. Single parents must take a different approach than two-parent families. Immigrants face an extensive list of challenges. Troublingly, the number of seniors with fixed pensions coming to food banks is increasing. There is no “one-size-fits-all” solution to poverty and no food bank can underestimate this reality.

3) It’s difficult to get a true measure of poverty, and the termination of Statistics Canada Long Form Census only makes this exploration more difficult. Recently the London Food Bank partnered with the Sisters of St. Joseph, with funding from the London Community Foundation, to inaugurate the London Poverty Research Centre for a specific reason: it remains a very difficult thing to acquire evidence-based statistics on those living in poverty. The Centre, now under the auspices of Kings University College, is seeking to develop a city-wide data base that can be used by all groups and individuals to get something of an accurate assessment on just how deep the constraints of poverty go in our community. You can’t really consider changing your model until your know what you’re up against.

4) Debt is becoming a serious problem. Statistics Canada recently reported that the average Canadian household debt-to-income ratio has climbed to a new high of 163.4%. That means that the average Canadian owes $1.63 (CDN) for every dollar they earn. That’s problematic for most of us, but what about those below the poverty line? Many worked up until just a year or two ago, but now that they are unemployed their personal debt makes getting ahead all the more difficult. And Canadians caught up in such a debt cycle are often resistant to government interventions for the poor that require tax investments.

We can segregate those trapped in poverty all we like, but at some point their numbers increase to a level where we have to acknowledge that the lack of solutions says something about us, not them.  “There is no Them.  There are only facets of Us,” says author John Green.  The fact that we permit the reality of poverty to grow in our midst is merely a sign of our lack of imagination and our desire to leave it for others to solve.  It should be clear now that nothing will transpire until those “facets of Us” that accept the status quo are no longer acceptable to us and that the better angels of our nature can never emerge if we permit the clutches of poverty to claim so many among us.

Tomorrow:Poverty’s Great Unknown (2)

 

 

Continuum

awww-img-irw_awww_taxes_631px330“An economist,” Laurence Peter says, “is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.”  He was the famous inventor of the Peter Principle – the belief that once a labourer rises to a position over his head, he will become incompetent.  Many of our modern day economists have been around a while, long enough for us to begin to question the present direction of modern capitalism, our financial markets, and the need for political systems to depend increasingly on economic growth for their validity.

For a long time the belief that each successive generation can be more prosperous than the last has driven much of the policy and financial apparatus in everything from interest rates to social programs.  It was never an exact science – perhaps best displayed whenever frequent recessions dashed our economic prospects with cold water for a time.  Yet we always seemed to bounce back and, over time, became more adroit at both predicting and preventing the worst of recessionary times.  It’s a continuum – perpetual growth – that has infused almost every major institution with the idea that economic expansion is a natural as breathing.

Well, these days we’re panting pretty hard.  For decades, even as global economies grew at dynamic rates, we were slowly coming to the understanding that the future of employment wasn’t a sure thing anymore.  Poverty, and the cost of maintaining it, was becoming a growing concern.  Even in the heyday of the environmental movement (it’s had a few), we were never able to land on firm policies or resolve how to reign in climate change because we were constantly being barraged with economic analyses claiming we couldn’t afford it.  The decline in middle-class purchasing power was largely masked by the flood of cheap products filling the global marketplace, but we are now coming to terms with the reality that consumption depends more on income than the prevalence of cheap items and with unemployment running at all-time highs, the middle class can’t spend like it used to.

Occasionally certain economists, like John Kenneth Galbraith, or more recently Paul Krugman or Robert Reich, have questioned policies structured on the belief of endless growth.  In the main, economists promote minimalist roles for governments.  That’s why we’re seeing the endless rounds of calls for austerity measures on both sides of the Atlantic, and occasionally across the Pacific.  The best way to stimulate economies, the traditional rationale goes, is to decrease public debt, relax regulations, and permit the free market to do what it does best.

Well, what is that exactly – its best effort, I mean?  The economic meltdown from this last recession still leaves a bitter taste in our mouths and the massive financial institutions still remain the easiest targets.  Ironically, trillions of public dollars were used to bail out financial institutions that showed little care for communities or the welfare of citizens.

But it goes deeper than that.  Small and medium-sized businesses are experiencing significant problems getting started or keeping going.  While parents still leave generous legacy gifts to their children, they have also left a public policy wasteland behind that provides decreasing investments in public holdings and institutions.  We have yet to see any credible environmental policies enacted by governments even as global warming attains a tighter grip around our collective throat.  Many companies that are actually leading the way in environmental reform nevertheless call for increasingly limited roles for governments in the climate change challenge. 

Businesses are permitted to acquire massive debts while at the same time calling on governments to tighten their purse strings.  Yet the irony of all this is slowly coming in from the periphery among citizens and their traditional trust in prolonged progress or even the advice of economists is becoming increasingly suspect.

And yet we go on.  In a world where billions of dollars are accumulated in mere hours we can no longer afford university, catastrophic drugs, higher employment, carbon taxes, even a home.  There is no longer a sense of confidence that the usual set of rules imposed on financial systems can generate similar outcomes to those of the past.  We have grown out of work, out of environmental sustainability, out of health, education, welfare, and precariously out of time.  We have grown and grown to the point that we no longer create the kind of jobs that can generously purchase commodities.  We have grown so much in the historic model that we have an abundance of supply that can no longer be purchased on the demand side because they can’t be afforded.  And in that one area where supply is increasingly limited – oil – we have no effective plans of what to do when supplies run out or when fossil fuel emissions alarmingly limit the possibilities for our children.

We have filled our world with growth concepts until we have run out of room to expand.  Economists ask us to hold tight, don’t borrow so much, pay off our debts, limit our public expenditures as a people, and collectively tighten our belts.  Yet they often fail to turn their sights on a corporate world that is draining the very resources we require as a people to tackle our greatest problems.

Worst of all, political parties across the board can’t break with that narrative, and this for one key reason: citizens vote against their own best aspirations.  The continuum drags on, with modern citizens the only ones who can bring about change but who refuse to bring economics back into the peoples’ hands lest it cost too much.

Dominos

Take a good look at this picture – a throwback to an earlier time that was great for those in the photo and not so good for their subjects. There’s Gadaffi in his early years as the new ruler of Libya. To his very left sits Abdel Nasser of Egypt, then Abdul Rahman of Yemen, and to the very right King Faisal of Saudi Arabia. These were the glory days, with Gadaffi’s youth and vigour standing in clear contrast to the brutal pictures we have seen this week of his last few minutes of life. Back then it seemed as if power was a permanent thing, to be passed on to handpicked successors when the fullness of time had come.

It was not to be, as history moved faster than the detailed plans and dreams of these leaders. Though in Gadaffi’s case the Arab Spring could claim much of the credit, the true reasons for the failures of such leaders had to do with their inability to spread great wealth among their people. Where there was financial reward, it was primarily from oil and it was almost exclusively for the ruling classes. Poverty was endemic, but tribal precedence, religious tradition, royal blood lines and military power were enough to maintain the status quo. Those paradigms have been blown apart, replaced by something that is yet to be defined.

It wasn’t that long ago that the breakup of the Soviet Union into 15 different entities captivated our collective imagination. We tut-tutted in a kind of morally superior way, just as we have done with the falling of repressive regimes in North Africa. They need democracy we said to ourselves about the Arab Spring, much as we claimed that free enterprise was required following the Soviet breakup.

While all this was going on, Western economies had been sowing the seeds of their own financial turbulence. Overindulgence has led to a new era of economic uncertainty. The continued promise by financial leaders that the middle class would be the foundation of a healthy democracy has proved pyrrhic. The size of the middle class in Canada has decreased by 17% in 20 years. Something isn’t right.

The tribal and class struggles of Eastern Europe and North Africa now seem eerily familiar. Some wonder if the West is on the verge of creating and tolerating a permanent underclass that will eventually rise up and give us a reality check.

This reality is making its presence felt in the United States. Just this week there have been riots, tear gas, and some police brutality in Oakland, California. Americans learned from the Congressional Budget Office that the income share of the top 1% has doubled since 1979. A CBS/New York Times polls revealed the mood of most Americans when they revealed that two-thirds of Americans believe money and wealth is unfairly distributed and half support Occupy Wall Street. More troubling yet, the polls show that 90% of Americans have no faith in the political system to make the right decisions to reverse their economic decline. In the Republic debate this week both Herman Cain and Rick Perry proposed giving even more tax cuts to the rich.

Does this constitute class war? No, but such developments could be stirring the beginnings of it. In North Africa and Eastern Europe wealth shared equitably was a historic dream of the centuries, but in the West we had largely succeeded at it and are now watching it slip away. Leaders, political parties, institutions – most are in decline, proving unable or unwilling to tackle the corporate giant and the onerous burden of accumulated debt and citizen disengagement. Religious leaders call for action for the poor but refuse to challenge their congregations to live sacrificially as the respective founders of their faiths did. Financial lending institutions consistently refuse loans to struggling small businesses but reward themselves with outlandish bonuses. Political leaders purport to care for the modern family, but refuse to tackle those key issues that would bring relief to parents and children.

Losing faith in our institutions means we have lost faith in ourselves, in our collective ability to renew ourselves for the challenge of a new day. But so much of our modern malaise is not about a loss of faith in those who lead us as it is about our inability to pursue solid and integral leadership among ourselves as citizens. Sadly, as Vaclav Havel reminds us, “The tragedy of modern man is not that he knows less and less about the true meaning of his own life, but that it bothers him less and less.”

A growing number of citizens in Western nations are saying “enough already.” You don’t have to understand the complex theories of economics to determine that something is wrong, misplaced, perhaps even broken. The citizens of North Africa have known this for centuries and have emerged into a new Spring. In the West, we watch it all slip through our hands as we face the autumn of our possibilities. I look at this picture, at Gaddafi’s self-confidence and vitality, and realize he couldn’t maintain such characteristics because he permitted economic injustices among his own people. It’s now our turn to consider our own faulty economic logic of the past years and rescue ourselves before we prove unable of our own accord to raise ourselves.

300

The big question: “Why are we wasting 400 million dollars on an election campaign nobody needs?” A valid query, except that’s it’s about 100 million dollars off the mark. Two years ago, in an election campaign called by Stephen Harper against his own election law (every four years), the PM continually maintained that the price was $300 million. Now that he’s in an election campaign with his government found in contempt of Parliament, he and his ministers keep saying the price has gone up by a $100 million in two years. They’re fibbing by a fair margin. According the Globe and Mail yesterday, Elections Canada estimates that this election will be $300 million.

But that still doesn’t answer the question: Why do it? Many reasons are floating through the airwaves out there, but it all boils down to one particular cause. People are right to grumble about the high cost of this campaign, but rather than asking why we should be putting out $300 million, we might be better to ask: “Why $35 billion in fighter jets without any competitive bid process?” Or again, “Why $10-13 billion for super prisons when the crime rate has been declining for almost two decades?” These are legitimate questions that the public also has a right to ask.

The problem is that you won’t get an answer. Why? Because the Conservative government has refused to provide the full cost of both of these expenditures. Pressed again and again in Parliament over the budget, Stephen Harper refused to answer. When the Speaker of the House of Commons instructed them to cough up all the paperwork, the government refused, leaving the Speaker with no choice but to find them in contempt.

All of the opposition parties know that some $55 billion went out the door for the stimulus package, and they also comprehend that this has left Canada with the biggest public deficit in its entire history. They, too, have a right to ask: “Why then would you give an equivalent amount out for fighters and prisons when we run precariously high deficits and debts? Give us the a full accounting of the books so that we would know whether to support your proposals as a government.” The answer was clear and unequivocal – “NO!” And so they defied Parliament, the opposition parties, and the people of Canada the right to know how their tax dollars are being spent. The objective and independent Speaker instinctively understood how this was a clear abuse of Parliament and, after providing them time to respond properly, ruled the government in contempt.

So, when I’m at the doors and people ask me why we need such an expensive election, I ask them: “Would you prefer $300 million or $100 billion?” Or, “Would you prefer $300 million or the $1 billion for the G8/G20 summit that the Harper government paid for without ever clearing those costs through Parliament?”

If the PM wants to make this election about the economy it won’t work because it has been his very economic management – the massive deficit and debt, money spent on “super objects” when Canadian families, students and seniors are struggling, the refusal to provide transparency for costs even to the Speaker – that has caused the contempt. It’s your money, it’s true. But if the government can just spend as it will without presenting the full costs, then, trust me, you’ll be out billions not millions. Efficient economic leadership requires honesty and transparency. You expect it at your bank, from the firm you work for, or from your investments. If you can’t get it from your government, then all that is left is to bring them down. This election isn’t about spending $300 million for nothing. It’s about having an election that will, in the end, save you billions and bring accountability back to the process. Well worth the price to save your earnings.

The Sour Smell of Success

The Bank of Canada’s Mark Carney released an update on the Canadian economy yesterday that told us third-quarter growth has been disappointingly less than expected and that the next four quarters will also fall behind expectations.  He then informed Canadians that we’ll eventually get out of this economic quagmire.

Carney was only doing his job of warning Canadians and trying to keep them believing at the same time.  It’s a high stakes, high-wire performance, meant to instill confidence and propel cautious actions.

Hidden in Carney’s report are two key issues of concern that speak to difficult days ahead. The first is our national productivity.  A sound economy is one innovative enough to create a rising standard of living and has enough tax revenue to support the public services citizens require.  But in both these areas Canada has fallen behind.

The largest deficit in our history was primarily created by a federal stimulus program that invested in 18-month short-to-medium term projects that kept people hired a little bit longer in order to build roads, stadiums, or renovate buildings.  Stimulus was meant to provide an immediate shot in the arm.  But without innovation it remained a dubious exercise that only created significant medium-term debt.  It is likely that over the next decade we will be unable to build long-term growth.  The best way out of the present economic mess would have been to generate good jobs by investing in new activities that were destined to create the jobs of tomorrow.  The federal government bypassed that option, choosing instead to invest in a band-aid outlay of funds that would hopefully tide us over until the recession was over.  Well, it largely has run its course, but our lack of prudent investment and innovative planning has meant the economy isn’t what it used to be.  Given the government’s ideology, it’s likely that deep cuts to the public sector will be their way of dealing with the bleeding – just another way of avoiding the deeper investments in the newer economy that is required.  You can’t have a solid recovery without people abiding in meaningful employment.

Carney’s second worry was household debt, and for many of us, this is where we fit into the larger story.  This lower rate of productivity that has descended on Canada means that every Canadian will be worse off by some $30,000 and our overall economy will be $1 trillion smaller than just a few years earlier.  That means we won’t be able to lift our incomes easily.  Carney reported that lowering borrowing costs resulted in Canadians purchasing more in ways that only added to their debt.

You can see the effects everywhere.  It seems to take forever for university and college graduates to acquire employment.  Those losing their jobs find little opportunity for transitioning to new opportunities.  A recent poll found that 6 out of 10 Canadians said they would be in financial trouble if their pay was one week late.  This is how thin we have stretched ourselves.  Our paycheque-to-paycheque lifestyle has now made us, and our children, economically vulnerable.  The easy access to credit has placed our modest gains in danger.

So there’s the picture.  Our private debt is now the highest in the world, and our public deficits are the highest in our history as a nation.  If our answer to that is to just go out to eat a little less, or for the government to spend massive amounts of cash on short-term projects, then we won’t have learned our lesson.  We are going to struggle in this country until we get this right.

Carney observed that responsibility for recovery “starts with the individual; it starts with the household, it extends to the lender, and then ultimately goes to policy makers.”  In so many ways, it’s exactly the opposite.  Unless we as policy makers make prudent decisions, creating the framework that eases the long-term burden on Canadian families, little else will matter.  Our recent successes were built on heavy borrowing and we’re now paying an onerous price.  It’s time to cast aside the temporary stimulus mindset and get on with building the prosperous and green economy of tomorrow.  Canadians have to start living smaller; their federal government has to start living smarter.

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